Dabur Case Study - A tale of two ERPs

In many of our past issues, we've discussed the pros and cons of ERP (Enterprise Resource Planning) implementations. We've also published some extraordinary case studies on successful ERP implementations across various industry segments. For the first time we showcase a company that's leveraging the benefits of not one, but two ERP systems, by streamlining its primary distribution system and outbound logistics. We're talking about Dabur India, an FMCG (Fast Moving Consumer Goods) company that specializes in nature care products. The company has put its money on two suites, MFG/PRO and BaaN. MFG/PRO can run in an offline mode using local database and it is network independent.

Dabur India's CIO (Chief Information Officer), Mr Gopal Shukla, points out that his company has three key strengths based on which it has grown to where it is today. One, it has a very strong brand image: Dabur is synonymous with nature care for more than hundred years. Two, is its products portfolio, with products that are always in high demand. Dabur's third strength is its distribution system that helps its products reach 47 stocking points, 10,000 stockists and 1.2 million retailers. Shukla says the company is now reinventing itself so it can position IT as the fourth key strength by streamlining its complete distribution system. He believes that Dabur can leverage IT to make its schemes and promotions more effective and profitable. "In the long run, people will say Dabur has four key strengths, IT being the fourth one," Shukla hopes.

A network that works
Dabur's network has a star topology with six DAMA (Demand Assigned Multiple Access) links from HECL (Hughes Escorts Communications Limited). There are around 40-50 TDMA (Time Division Multiple Access) VSATs (Very Small Aperture Terminals), which are used for connecting the distribution network. Then there's VPN (Virtual Private Network) connectivity between Dabur's offices in Delhi and Mumbai, and the corporate office. This link will soon be extended to other locations, too. There are some RF (Radio Frequency) links for connecting the local offices within the city. The network runs on multiple media, the choice depending on the location and the feasibility. The company uses IDSN connectivity as a backup for its primary connectivity. Surprisingly, contrary to the current trend, Dabur doesn't have too many leased lines to support its datacom network. Says Shukla: "As of now, the dependence on terrestrial links is less, but in future we'll be getting on to it."

Integrating marketing
Dabur is a very old FMCG company. Its main revenue is typically generated by the outbound logistics. Dabur's outbound logistics is very extensive: There are 29 factories where different products are manufactured and delivered to various parts of the country. The finished products are stored in six major warehouses. Dabur also has 47 C&F (Carrying & Forwarding) Agents. The scale of operations is such that the company dispatches 100 truckloads of goods every day from the 29 factories. These products reach to more than 750 large distributors all over the country through the C&F agents. Explains Shukla: "For an operation of this magnitude, we can't work with just manual controls on the outbound logistics. We carry a huge inventory over a very wide footprint, in terms of reach, within the country."

How does one manage all this? There are IT systems, which maintain details on inventories in each location where the finished goods are dispatched. The outbound billing is also done on these systems. The distribution forecast planning is made on the same system to figure out the difference between the need and the actual inventory status. This helps decide how to stock up the different warehouses so that the outbound logistics can be supported. "This is where computer systems come in handy they help keep a valid record of the huge data," says Shukla. Once the outbound logistics is incorporated into the information systems, you've to pull the entire supply chain into the same setup. That includes distribution of goods to different locations. Also, one has to consider the raw material demand generated by the various factory locations. "Manufacturing per se isn't a very complicated process; distribution is the main thrust area. That's where we look at the maximum RoI for IT," Shukla reveals. Aligning IT strategy was the easy part. Given a huge setup like Dabur, the difficulty lay in gaining control on inventory and outbound logistics to cut costs.

Why MFG/PRO
As we mentioned before, Dabur works on two ERP systems. For the outbound logistics it runs QAD ERP suite known as MFG/PRO. For manufacturing locations, there's BaaN. Shukla recalls that before he joined Dabur as CIO, the company was using just BaaN. BaaN requires a central server. To fit so many locations many of them situated in small and remote areas into a central processing system, Dabur needed a VSAT (Very Small Aperture Terminal) network. As with most companies, sales at Dabur peak towards the last 4-5 days of the month. If the company were to depend on this kind of a central server architecture, which would be connected through VSATs, the network would be enormously overburdened during every month-end. However, the company never wanted to make the network a critical component in the automation of outbound logistics. So what workaround did Shukla and his team come up with? "We decided to go for an ERP solution that was 'network independent'. We found that MFG/PRO could be run on independent servers at each location it was a good choice that suited our unique needs."

Implementation
Once it was decided that MFG/PRO it will be to handle outbound logistics, a core implementation team which comprised end users from departments, like distribution and planning, finance, sales and IT was set up. The deployment was made in four stages. The first included a requirement study where a model was developed. Dabur has five SBUs (Strategic Business Units), each with diverse needs in terms of the outbound logistics. Explains the CIO: "We're a traditional FMCG company into family and healthcare products. We've pharmaceutical products. We also have food products, which is a perishable products division. We even have ayurvedic products for both the medicine and home segments. All these divisions have diverse requirements." The core team had its job cut out: It had to develop a common business model, which could cater to every segment at the same time..

What MFG/PRO can do
MFG/PRO is a fully integrated ERP (Enterprise Resource Planning) solution, which includes manufacturing, distribution, customer service and financial applications.

In an attempt to synchronize promotional schemes at the trade level with supply chain processes, Dabur India deployed MFG/PRO. Dubbing the implementation Project Synergy, the company planned a countrywide rollout by July 2002. The aim was to create an action plan to integrate the marketing strategies with the ERP solution. MFG/PRO helps create deliverable processes in the outbound logistics and seamlessly integrate it with strategic inventory management, credit control and sales generation. The system significantly helps in tracking primary sales through an analysis of stock movements online. Traditionally, FMCG corporates use back-end systems to monitor secondary and tertiary sales. However, this can be effectively initiated only when primary sales are monitored. The technology needed for this should aid efficient forecasting, along with evaluation of secondary and tertiary sales. Further, Dabur believes that the ERP system aids brand building by helping to assess the regional performance of brands. The company feels that its brands and SKUs (Stock Keeping Units) have mobility indicators within specific divisions, areas and zones. In areas with low brand penetration, the company can use the ERP system to gear up the brand communication exercise.

Thirdware Solution Ltd, which has conceptualized this project for Dabur, says its client has seven warehouses, multi-manufacturing locations and complex distribution systems. The goal of such projects is to reduce the inventory level, ensure the right product-mix for promotional schemes and enhance visibility at every level of the supply chain. This finally consolidates into effective brand leveraging. The system is primarily targeted at optimizing the strategies that incorporate product movement, distribution and promotions. .

Thirdware implemented the MFG/PRO solution for primary sales from the point of finished goods being dispatched from manufacturing facilities to the nationwide network of 45 C&F (Carrying and Forwarding) agents. Having a strong supply-chain edge in the FMCG industry helped Thirdware implement the sale and distribution solution at Dabur within the agreed time.

In the second stage of the implementation, the core team, after getting all the processes in place, did a 'conference pilot' to test the product and its functionalities. In the third stage, the pilot was rolled out in a small setup consisting of one C&F agent, one warehouse and one factory. The final stage of the implementation saw the product rolled out zone by zone across the different locations.

"We've just finished the last lap and so far the feedback from the end users has been extremely positive," beams Shukla. He claims Dabur now has a very tight control on its distribution infrastructure. Thanks to the Intranet, Users can now access information from all the countrywide locations on receivables, like finances and inventories, and the supply chain..

How does it help
Information on inventories, return of products, collections done and dispatch orders from warehouses are now all available at a central location. This is presented on an Intranet platform, which helps give a homogeneous picture across the organization whether you're sitting in the corporate office, the zonal offices or any of the remote sites. What's more, the information is so interactive that you can actually do research based on your needs. You can find out which SKU (Stock Keeping Unit) is selling well and which SKU isn't. You can also calculate the returns. Using the ERP tool, it's even possible to evaluate the performance of individual stockists. The CIO makes a rare confession: "The IT implementation at Dabur has always been a moving target. There isn't a single day when we can say that we've completely executed the whole plan. Streamlining the primary distribution was the target so far. (The primary distribution includes the inventories that are moving out from our locations and reaching the stockists.) Then comes the secondary distribution: We've material lying with stockists, and we've to decide on issues like how the material will reach the retailers, what the sales force is doing in the field, how many new retailers are being added every month, what's the coverage of small towns, large towns, upcountry, what's the dependence on the wholesale dealers, how much cross-market subsidization is given, how much cross-product subsidization is required, and so on."

Shukla goes on to add: "There are so many aspects to the secondary distribution that having our IT machinery to take care of all of them will take a long time. The job of streamlining the primary distribution system, which we just completed, was only the initial phase."